yuan - All posts tagged yuan

As Chinese savers get jittery about bankruptcy rumors, one rural lender has come up with a way to soothe their fears: Stack piles of cash in plain sight. In one branch of Jiangsu Sheyang Rural Commercial Bank, the towers of yuan notes reached higher than a teller’s head. A block of yuan bricks as big as a double bed stood ready in the background — but all still behind plate glass, of course.

As expected, China has widened the daily trading band for the yuan’s value against the dollar. For the most part, economic circles are greeting the move with a yawn, though the consensus is that this could slow (or just maybe even stop) the Chinese currency’s long, upward crawl in the near term.

First of all, there seems to be agreement that this isn’t a very big deal in the grand scheme of things. This, because the central bank will still set its desired “parity rate” (the level that determines the center of each day’s trading band, now widened to 2% above or below the parity rate).

High atop Mt. Gox on Wednesday, it was getting uglier by the moment. While New York was asleep, bitcoin on that exchange was sliding below $500 and last trading at $481. That means it’s more than halved its value from Dec. 11 — that $1,000 level looks really far off now. The low so far is $455.

When the U.S. Federal Reserve said it would soon scale back the size of its easing stimulus, it was bad news for currencies in the emerging markets. India’s rupee and Indonesia’s rupiah were especially hard hit as money gushed out during the third quarter.

But in China, it was a different story. As Capital Economics points out in a note Monday, new data out suggest that not only did China escape the exodus of global capital – it saw money coming in, enough of it to force the central bank to sell off the yuan to keep it cheap.

In the 1990s, big money was made selling the yen, where the Bank of Japan was pushing interest rates toward zero, and buying the dollar . Pre-Lehman, it was the long Australian dollar/short yen carry trade. Now, to the likely surprise of many, China’s yuan currency offers the highest carry in the world when adjusted for volatility, Deutsche Bank strategists say.

Official reserves of global central banks grew to more than $12 trillion in 2012, from $2 trillion in 2000, the WGC said.

Data showed a significant shift away from the U.S. dollar over that 12-year period, and the share of “other” currencies in reserves has tripled in absolute terms since 2008, it said. Dollar holdings by central banks fell from 62% to 54% of total reserves between 2000 and 2012, according to the report.

A surprise slowdown in lending by Chinese banks in October could be evidence that China is preparing to lean into the wind instead of stoking up another big round of credit growth.

Data released Monday showed Chinese banks extended 505 billion yuan ($81.1 billion) in new loans for the month, down 14% from levels a year earlier and well short of expectations from a Dow Jones Newswires survey for 590 billion yuan in loans during the month.

Barclays noted a change in tone at China’s central bank, saying the PBOC’s recently released quarterly report on monetary policy revealed that an important shift had taken place.

The leadership transition expected this week at China’s Communist Party will set the stage early next year for a new generation of leaders to take the country’s reins for the next five to 10 years.
The Congress comes amid expectations that policy makers may boost fiscal and monetary stimulus in the near term. But economists at HSBC say the new leaders will almost certainly also unveil certain “big bang” directional changes that will “revolutionize” the country’s financial system.
“We think interest rates will be liberalized, the bond market will double in size, and the [yuan] will become convertible within five years,” said HSBC analysts led by China chief economist Hongbin Qu, who expect the changes to make capital allocation more efficient, boosting the private sector and providing the middle class with greater choice on investing their money.

The currency war – a term coined by Brazilian Finance Minister Guido Mantega – is set to enter a new phase, according to Societe Generale strategist and uber-bear Albert Edwards, as governments try to boost competitiveness by lowering their exchange rate. Chinese yuan Japan already has pushed the yen below critical multi-year support, and Edwards [...]

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